The saga of Icelandic airlines is far from over.
Attention is back on the country’s legacy airline, Icelandair. The company announced earlier this week that its earnings would be lower than previously stated, with the latest estimate being about half of that at the start of the year. The first estimate was $170-190 million USD. In July the company lowered expectations to $120-140 million USD, and the latest announcement was $80-100 million USD. All these estimates are made without considering interest, taxes, and other liabilities.
Industry observers were not surprised by these shifting estimates and expected the latest. WOW Air’s woes have been dominating the headlines of late. WOW’s troubles even helped Icelandair’s stock price recover slightly. After this week’s announcement it fell again, by around 20%. Icelandair’s CEO, Björgólfur Jóhannsson, announced his resignation the same day. The airline’s chief financial officer will take over temporarily while the board searches for a new CEO.
Both Icelandic airlines are facing similar challenges. Fuel prices and competition are increasing at the same time growth in tourism has slowed significantly. Björgólfur noted that Icelandair has a strategy to deal with this but has not implemented them quickly or thoroughly. He took responsibility for this failing in his resignation statement.
Those plans include price increases early next year. They also include efforts to streamline operation and shift to a business model similar to WOW Air, in which amenities are not included but ticket prices appear cheaper in online comparisons. The airline also adjusted its schedule which led to an imbalance in available flights to North America and Europe. A curious development considering that trans-Atlantic flights have been a selling point for decades.
WOW Air is not out of the woods either. The company is still in search of investors, and this leaves thousands of employees and travelers wondering about their futures.